Analysts anticipate that the Pakistani rupee will maintain stability in the short to medium term following the country’s successful negotiation of a $7 billion loan agreement with the International Monetary Fund (IMF) to bolster its economy and address mounting debts.
Throughout the week, the rupee demonstrated stability within a narrow range and received favourable news. Closing at 278.4 on Friday, the rupee ended the week at 278.5 per dollar in the interbank market. Moreover, June saw a notable increase in remittances from overseas Pakistani workers, reaching $3.2 billion, marking a 44% surge from the previous year. The central bank’s foreign exchange reserves remained steady at $9.4 billion over the past two weeks. Notably, the rupee-dollar parity has stabilized just below 280 after peaking at 307.5 in June 2023.
The signing of a new 37-month Extended Fund Facility (EFF) with the IMF represents a significant milestone for Pakistan, following the successful conclusion of a $3 billion standby arrangement in April. While the deal is pending approval by the IMF Executive Board, the IMF emphasized the importance of reducing inflation, enhancing access to financing, and fortifying external reserves for sustainable development and resilience.
In light of the new IMF program, financial experts foresee a stable Pakistani rupee in the short to mid-term, propelled by positive sentiment surrounding the agreement. Arif Habib Limited emphasized the significance of the new EFF program, underlining its role in securing and backing the country’s long-term external sector outlook.
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The Tresmark agency expressed optimism regarding the early announcement of the IMF staff-level agreement, predicting further strengthening of the rupee. Expectations of heightened hot money flows, increased multilateral inflows, and larger export proceeds have contributed to more positive market sentiments. Although the market does not foresee substantial gains, it expects the rupee to remain around the 278/$ level.
Following these developments, premiums for 3-6 month tenors have risen, with expectations of significant market inflows in the coming week. The projection also suggests that exporters will find the 1-3 month tenor range particularly attractive for selling.
